Financial startup basics are fundamentals that startups must know to ensure financial health and secure the funds needed to expand. Without these basics, nine out of 10 startups fail. The reason is straightforward – cash flow. Without a clear understanding of how to track and project cash flow, a new business will not be able to manage its budget or invest in growth.
Investors should have access to the financial projections of your startup as well as income statements. These models have to be carefully calculated to accurately reflect your company’s economics. This includes easy-to-overlook expenses like shipping, taxes and insurance, payment processing fees and utilities.
If traditional lenders aren’t an option, family and friends can offer financing to startups in the early stages. In this scenario, however, it is important to have loan terms outlined to ensure there are no conflicts regarding repayment obligations or future performance expectations.
Startups can also look for venture capital from crowdfunding platforms or private investors such as Kickstarter. However, these kinds of financing usually require a written business plan that includes a detailed financial model. You can gain a better understanding of your company’s finances by creating the model. This will allow you to make educated decisions about how much capital to put into and what strategic goals to achieve in the next year.